Disruption to global supply chains is becoming an increasing drag on businesses’ optimism about the economic recovery from the coronavirus crisis, according to a survey of German manufacturing companies.
Almost half of German manufacturers reported disruption to their supplies of parts or materials in the past month, the highest level for 30 years, the survey by the Ifo Institute found.
Rising consumer demand, restrictions to stem the pandemic’s spread and acute container shipping delays have combined to put pressure on global supply chains, leaving manufacturers around the world scrambling to cope with shrinking inventories and delayed orders.
In Germany the disruption, including shortages of semiconductors, plastics, rubber and metals, added to new coronavirus containment measures; as a result businesses’ confidence rose by a smaller than expected amount this month, Ifo discovered.
“Both the third wave of infections and bottlenecks in intermediate products are impeding Germany’s economic recovery,” said Clemens Fuest, president of Ifo.
Ifo’s business climate indicator rose slightly to 96.8 in April, its third consecutive monthly increase and its highest level since June 2019, as increased confidence in the current business climate offset weaker expectations for the coming six months.
Fuest said that German manufacturers had reported their highest level of capacity utilisation for almost two years, but he added that 45 per cent “reported bottlenecks in intermediate products — the highest value since 1991”.
Shortages of many products from semiconductors to polymer resin used to make plastics have forced manufacturers to cut production, leaving them scrambling to rebuild stocks and unable to meet rising demand.
Almost three-quarters of companies in the rubber and plastic sector told Ifo they were affected by supply chain disruption, while 60 per cent of those in the electronics and automotive sector and 42 per cent in the chemical industry complained of problems.
Carmakers lost out on making hundreds of thousands of vehicles in the opening months of this year and most large manufacturers announced production stoppages that analysts expect to cost the industry billions of dollars.
Volkswagen has warned its top managers to brace for a bigger production hit in the second quarter because of the global chip shortage, the head of the company’s Seat brand told the Financial Times.
A sharp rebound in global trade, driven by China, has led to a surge in orders for European factories in recent months. However, overall eurozone industrial production remains below pre-pandemic levels and supply chain disruption, particularly in the auto industry, contributed to a 1 per cent drop in factory output in the bloc between January and February.
Michael Holstein, chief economist at DZ Bank, said: “Due to the global demand for industrial goods . . . the bottleneck in important intermediate products such as memory chips is noticeable. It could take months to overcome delivery issues, which is why the outlook is diminishing a bit.”
Copper prices hit a 10-year high this month amid concerns about the supply constraints, and the price of hot rolled steel in Europe recently reached its highest level for more than a decade. Automakers have also been hit by shortages of natural rubber, an important material for tyres and other auto components.
Last week a survey of eurozone purchasing managers by IHS Markit found widespread supply chain disruption, including the greatest lengthening of supplier delivery times in the survey’s 23-year history and an acceleration of factory input cost inflation to its highest level in a decade.
Source: Economy - ft.com
